Litigation: Rule 68 offers of judgment—A matter of clarity

Rule 68 of the Federal Rules of Civil Procedure is designed to encourage settlement and avoid litigation and its associated costs. The rule permits a defendant to allow the plaintiff to take judgment against the defendant for a certain amount, with costs then accrued. The plaintiff has 14 days to accept the offer. If it does not, the plaintiff must obtain a more favorable judgment than the offered amount or pay defendants’ post-offer costs. Simple enough, right?

Not quite. If the Rule 68 case law shows anything, it is that defendants must draft clear and unambiguous offers of judgment.

Rule 68 disputes are like contract cases; they involve an offer, acceptance or non-acceptance and terms. Courts are asked to assess whether there was a meeting of the minds. If so, courts will determine whether any terms are ambiguous and, if so, whether those terms should be held against the drafter, i.e., the defendant.

One court recently struck an “accepted” offer of judgment, finding no real meeting of the minds. In Henchen v. Renovo Services, LLC, the defendant made an offer of judgment for $3,000, but the offer was silent as to whether it included attorneys’ fees. The plaintiff accepted, adding that he would pursue attorneys’ fees. The defendant immediately amended the offer of judgment to clarify that the original offer included attorneys’ fees.

The Henchen court reviewed the prior history of settlement negotiations, in which offers of $3,000 indisputably included attorneys’ fees, and noted the defendant’s actions upon receipt of the plaintiff’s “acceptance,” to find that there was no meeting of the minds. The court then voided the acceptance and returned the case to its pre-offer status.

Disagreements can also arise where the offers do account for attorneys’ fees. In Evans v. Inmate Calling Solutions, plaintiffs did not accept an offer of a permanent injunction, monetary compensation of $1,000 plus reasonable attorney fees to be determined by the court. One plaintiff, who had brought a statutory count that included attorneys’ fees, subsequently failed to obtain a “more favorable” result.

The Evans court noted Supreme Court precedent holding that where an underlying statute defines “costs” to include attorneys’ fees, those fees are recoverable costs under Rule 68. See Marek v. Chesny. Accordingly, the court ordered the plaintiff to pay $55,580 in reasonable attorneys’ fees.

In Robinson v. KBDC Investments, LLC, the defendant’s offer included payment of reasonable and necessary attorneys’ fees incurred prosecuting a Fair Labor and Standards Act (FLSA) claim. The plaintiff accepted the offer, but otherwise failed to prevail on the FLSA claim. The court found that the terms of the Rule 68 offer controlled, not the terms of the statue, and the defendant clearly offered to pay the fees.

As is too often the case in such matters, the present dispute could have easily been avoided had the Defendant taken more care in crafting its Offer of Judgment. Defendant could have specified . . . a particular amount of attorney’s fees that it was willing to pay, over and above the threshold settlement amount of damages and costs. Alternatively, it could have offered a single sum that was intended to encompass all of the elements of Plaintiff’s plea for relief. [Emphasis in original.]